The Medicare Muddle

New York Times ^ | 3/26/2004 | PAUL KRUGMAN

[liberallarry]

n advance of Tuesday's reports by the Social Security and Medicare trustees, some credulous journalists wrote stories based on tips from advocates of Social Security privatization, who claimed that the report would offer a radically downgraded vision of the system's future. False alarm: projections for Social Security are about the same as last year. Projections for Medicare, however, have worsened: last year the trustees predicted that the hospital insurance trust fund would last until 2026, and now they've moved it back to 2019.

How should we react to this news?

It has become standard practice among privatizers to talk as if there is some program called Socialsecurityandmedicare. They hope to use scary numbers about future medical costs to panic us into abandoning a retirement program that's actually in pretty good shape. But the deteriorated outlook for Medicare says nothing, one way or another, about either the sustainability of Social Security (no problem) or the desirability of private retirement accounts (a lousy idea.)

Even on Medicare, don't panic. It's not like a private health plan that will go belly up when it runs out of money; it's just a government program, albeit one supported by a dedicated tax. Nobody thinks America's highways will be doomed if the gasoline tax, which currently pays for highway maintenance, falls short of the system's needs — if politicians want to sustain the system, they will. The same is true of Medicare. Rising medical costs are a very big budget issue, but 2019 isn't a drop-dead date.

The trustees' report does, however, give one more reason to hate the prescription drug bill the administration rammed through Congress last year. If deception, intimidation, abuse of power and giveaways to drug companies aren't enough, it turns out that the bill also squanders taxpayer money on H.M.O.'s.

A little background: conservatives have never mounted an attack on Medicare as systematic as their effort to bully the public into privatizing Social Security. They do, however, often talk about Medicare "reform." What this amounts to, in practice, is a drive to replace the traditional system, in which Medicare pays doctors and hospitals directly, with a system in which Medicare subcontracts that role to private H.M.O.'s.

In 1997 Congress tried to take a big step in that direction, requiring Medicare to pay per-person fees to private health plans that accepted Medicare recipients. There was much talk about the magic of the marketplace: private plans, so the theory went, would be far more efficient than government bureaucrats, offering better health care at lower cost.

What actually happened was that private plans skimmed the cream, accepting only relatively healthy retirees. Yet Medicare paid them slightly more per retiree than it spent on traditional benefits. In other words, instead of saving money by subcontracting its role to private plans, Medicare was in effect required to pay H.M.O.'s a hefty subsidy.

The only thing that kept this "reform" from being a fiscal disaster was the fact that after an initial rush into the Medicare business, many H.M.O.'s pulled out again. It turns out that private plans are much less efficient than the government at providing health insurance because they have much higher overhead. Even with a heavy subsidy, they can't compete with traditional Medicare.

There's a lesson in this experience. Sometimes there's no magic in the free market — in fact, it can be a hindrance. Health insurance is one place where government agencies consistently do a better job than private companies. I'll have more to say about this when I write about the general issue of health care reform (soon, I promise!).

But whether because of ideology or because of H.M.O. campaign contributions, the people now running the country refuse to learn that lesson. As part of last year's prescription drug bill, they tried again, offering an even bigger subsidy to private plans.

And that turns out to be an important reason for the deterioration in Medicare's prospects: of the seven years lopped off the life of the trust fund, two are the result of increased subsidies mandated by last year's law, mainly in the form of higher payments to H.M.O.'s.

So what did we learn this week? Social Security is in decent shape. Medicare has problems, but ill-conceived "reform" has only made those problems worse. And let's rip up that awful prescription drug bill and start over.  

[liberallarry]

Sometimes there's no magic in the free market

The best "ism" is pragmatism.

[Mr. Bird]

Health insurance is one place where government agencies consistently do a better job than private companies.

This is quite an interesting statement, but I don't think he can defend it honestly. It is similar to saying that the government is better at giving out welfare than private companies.

Health care delivery as it exists today may be more efficiently delivered by the government; but that probably means we are not getting the best possible system. And what are we really talking about here? Health care for the elderly. If Krugman means that the government is more able to pay the bills for old people with multiple issues, he's certainly right (no profit making corporation would try). But Krugman believes that government should pay the bills, so he has no interest in debating the real point: how much should healthy citizens pay for unhealthy ones?

It's an uncomfortable subject, to be sure, but it needs to be discussed. We've got little old ladies in Palm Beach going to 6 doctors each week, just for the conversation. That's ridiculous.

[liberallarry]

how much should healthy citizens pay for unhealthy ones?

Especially elderly unhealthy ones. That's the heart of the health care debate - as you say - although few are willing to face it honestly.

Modern health care is terribly expensive and most people incur these expenses in the last two years of their lives - when truly large amounts of money are expended to keep them "alive" for a little longer.

I recently had to face that in a very personal way. A 65 year old friend who never took care of himself - two packs of cigarrettes and 10-15 Pepsis a day plus no exercise - suffered a massive stroke which totally paralyzed him. His H.M.O. quickly concluded that rehab was impossible and warehoused him...meaning he'll lie in bed with minimum legal care until he dies. But that care requires round-the-clock monitoring and extensive support since he can't do anything at all for himself. That's expensive. His family and friends are seeking government aid to place him nearer to them in a better environment where his chances of partial recovery and quality of life are much better. Can you blame them?

And what's the alternative? No one person and few families are in a position to deal with such problems at home. So shall we kill such people?

[jpl]

Implement means testing in the big welfare programs now.

[Buffettbassman]

Anyone who write things like "health care...is more efficiently delivered by the government" hasn't one single thought that bears any close resemblance to a clue!

I've spent my entire adult career as a providerand administrator in health care. There isn't a SINGLE government run health care program that is even close to efficient or even comes close to delivering the minimum care necessary.

With all due respect Liberallarry...you sir, are as clueless as they come. I pray that your health isn't contingent on one of these government entitlement programs that simply do nothing but overburden tax payers with substandard health care at exorbitant costs because they're laden with administrative overhead!

Please! Spare me the sanctimony

[Buffettbassman]

Mea Culpa Larry..
I mistaken thought you authored that piece before I replied. My comments still hold for the author.
My apologies...

[liberallarry]

I've spent my entire adult career as a providerand administrator in health care. There isn't a SINGLE government run health care program that is even close to efficient or even comes close to delivering the minimum care necessary.

Hyperbole...but essentially true.

But you've left out the important detail that private programs are worse. They're worse because they are unable to meet mandated standards while providing good R.O.I. and salaries...as Krugman notes.

And once we dispense with the ideological clap-trap we are still facing the essential problem noted by Mr. Bird and commented on by myself.

[liberallarry]

No need for an apology. I have a thick skin. :)

The problems are very serious. In my analysis they boil down to three things

1) The health care system is forced to provide service to those who can't pay
2) The elderly "living dead" command a huge share of health care resources
3) Modern health care is intrisically and unavoidably terribly expensive...and will remain so pending future technological advance

Any health care system - public or private, efficient or not - is going to be costly as long as these things are true.

[M. Dodge Thomas]

This really is an issue – and not just at the end of life.

A while back I met a man who had maxed out the health care lifetime benefits at three successive jobs (around $2M total) - his family had elected maximum care for a very premature infant, this despite the fact the child had multiple problems at birth and was unlikely ever to achieve an independent life. And in fact his son required intensive 24x7 care and was experiencing a long series of health crisis required repeated hospitalizations.

This man was very proud of his choice, and he and his family were obviously making enormous personal and financial sacrifices for their child.

But I couldn’t help thinking, looking across the thirty or so desks in his department, that this one child was consuming, and would perhaps continue to consume, the entire health insurance premium of very worker there (and then some).

That they were, in effect, being forced to pay for his choice.

I don’t know what the ideal solution is. But it seems to me that one approach would be to cap the lifetime benefits to any given individual from public funds for intensive medical intervention – beyond this point society would have an obligation to pay for effective palliative care (sometimes not all that inexpensive itself, but at least limited in duration) but nothing else.

Of course, there are all sorts of "slippery slope" problems here.

Bt IMO this is one of those cases where the public is ahead of the politicians. We already make such decisions (for example, when allocation organs for transplantation), and when Oregon decided to formally triage public health care spending the eventual list of priorities was remarkably uncontroversial.

[tcostell]

Actually there is a great deal that can be done to reduce costs by deregulation. There is no need for a doctor to be present to set a bone for example when a trained and qualified nurse (or some other trained care giver) can provide that service as well. In fact much of what we currently require doctors for can be passed off to other more abundant and less expensive staff.
But what we would be talking about then is a systematic deconstruction of our entire system of Medical regulation and I doubt the trial lawyers or AMA would be interested in something like that.
Eventually, when the system gets bad enough, another Reagan will come along and the process will begin. But deregulation won't solve everything. there will still be a question of how much are the healthy willing to carr for the unhealthy. There will have to be limits set.
But why Krugman is telling such an obvious bundle of lies is beyond me. This pushes the envelope even for him.

[cyborg]

ping

[Taliesan]

There is no need for a doctor to be present to set a bone for example when a trained and qualified nurse (or some other trained care giver) can provide that service as well.

No nurse -- none, zero, zilch -- is either trained or qualified to "set a bone".

Are you an orthopedic surgeon?

[Taliesan]

It turns out that private plans are much less efficient than the government at providing health insurance because they have much higher overhead.

Nonsense. I've spent an entire life in health delivery and administration; I'd bet Krugman doesn't even know what this sentence means.

[Buffettbassman]

The problems are intrinsic to the delivery system. All who are involved in its delivery made significant capital investment. Doctors, Therapists, Nurses, Hospitals, Clinics... All expect to make a decent ROI. I certainly did after 4 years of undergrad, 3 years of postgrad, an underpaid internship year..etc... etc... With that said...nationalizing the delivery system is tantamount to lowering the quality level to the lowest common denominator...just like our educational system is now. Fundamentally, it's the the same old argument. Is health care a right? Well, the question is improperly posed simply because of the complexity of how we define health care. Your response defined health care three different ways...care to people who can't pay...care to people who are high users of health care and the sheer volume of the care they receive effects their quality of living and the tax payer who subsidizes the above.

There is no uniform approach that will adequately address the multiplicity of needs of this or any other health care system. That's why a "one size,fits all approach" will not work.

I am a free market proponent. I believe if the government backed out of health care and removed the burdensome administrative requirements to its provision, that prices and services will command a much more patient friendly system. Most of health cares' increase in cost is directly proportional to the regulatory garbage the government places between provider and patient.

[Paul C. Jesup]

Even on Medicare, don't panic. It's not like a private health plan that will go belly up when it runs out of money; it's just a government program, albeit one supported by a dedicated tax.

This statement is a perfect example of socialist illogic.

[Buffettbassman]

I agree. The idea that a nurse can set a fracture is absurd. Let me ask this...How many nurses do you think would bear the liability risk at their salaries? I married a Nurse Practitioner..I say unequivocally. NOT ONE.

[Buffettbassman]

Let me add another point...the reason there is such animus toward Certified Registered Nurse Anesthetists is in large part because the law does not release a physician from liability because the CRNA cannot practice in most states without a physician supervising the care they provide.

Why place your career in the hands of someone with less training than you?

[Buffettbassman]

I agree! One just has to look at countries with social medicine to know their models are failing under the same pressures ours is under. This is crucial considering these countries each have significant price caps to prescription drug costs. Could you stand to wait for a CT scan 6 months like they do in Canada? That's of course provided some government functionary with barely a high school diploma decided if you needed it or not.

[Taliesan]

PA's are reducing some digit dislocations in ER settings, with immediate follow up with an orthopedist. But, trust me, they do not EVEN want to start reducing fractures.

"If you can't do the open reduction to fix a failed closed reduction, don't attempt the closed reduction."

That said, mid-level providers are a great development, and they can indeed deliver a lot of routine care competently, efficiently, and often more compassionately than a physician.

[Buffettbassman]

Agreed...let's see them bare sole liablity for the care they provide...let's see them pay physicians malpractice rates and we will see how long these people stay in healthcare.

I had 6 NP's working for me at one time. They were wonderful! I don't doubt any of what you wrote.